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An equity transfer agreement is a contract between two parties, one of whom transfers their ownership rights in a business to the other. The agreement outlines the terms and conditions of the transfer, including how much money will change hands.
An equity transfer agreement can also specify specific parameters such as what happens if one party dies or becomes incapacitated. Equity transfers are often used by family members who want to keep their business within the family. Still, they’re also common for purchases involving multiple partners with differing levels of investment.
Below is a list of common sections included in Equity Transfer Agreements. These sections are linked to the below sample agreement for you to explore.
EQUITY TRANSFER AGREEMENT ENTERED INTO BETWEEN
WANG JUN, HE NING
YANZHOU COAL MINING ORDOS NENG HUA COMPANY LIMITED
THE REORGANIZATION OF INNER MONGOLIA XINTAI COAL MINING COMPANY LIMITED
This equity transfer agreement (the “Agreement”) was signed by the following parties at Dongsheng District of Ordos, the Inner Mongolia Autonomous Region on 11 July 2011:
Transferor A: Wang Jun; identity card no.: 152701196101100913
Transferor B: He Ning; identity card no.: 61272419780209005X
Transferee: Yanzhou Coal Mining Ordos Neng Hua Company Limited (“Ordos Neng Hua”)
Location: North of Weiqi Road, Kangbashi District, Erdos
Authorized representative: Wang Xin
Target Company: Inner Mongolia Xintai Coal Mining Company Limited (“Xintai Company”)
Location: Dongsheng District of Ordos, the Inner Mongolia
Authorized representative: Wang Jun
Xintai Company, a company of limited liability incorporated by the Inner Mongolia Autonomous Region Commerce and Industry Bureau, owned and operated the Wenyu coal mine (“Wenyu Coal Mine”) of Inner Mongolia Xintai Coal Mining Company Limited. Wenyu Coal Mine has consolidated the original Wenyu coal mine of Xintai Company and the original Manlailiang coal mine of Ordos Qianqiu Mining Development Co., Limited. The Department of Land and Resources of the Inner Mongolia Autonomous Region issued document nei guo tu zi cai hua zi no. [2010]017 for the approval and review of the planned mining area of Wenyu Coal Mine after the consolidation. The design production capacity of Wenyu Coal Mine was 3 million tonnes per year with coal field area of 9.359km 2 . Currently, the 3-million-tonne consolidation and expansion project of Wenyu Coal Mine was in trial production (except for business license, other licenses such as safety production license and coal production license are still under process.
| 2. | Wang Jun and He Ning are the shareholders of Xintai Company, of which Wang Jun and He Ning hold 70% and 30% equity interests, respectively. Each of Wang Jun and He Ning legally and validly owns the equity interests of Xintai Company, which are free of pledges and third-party rights. |
| 3. | Ordos Neng Hua, a company of limited liability incorporated by the Bureau of Industries and Commerce Administration, Ordos, the Inner Mongolia Autonomous Region, is a wholly-owned subsidiary of Yanzhou Coal Mining Company Limited. |
| 4. | Wang Jun and He Ning is proposed to cooperate with Ordos Neng Hua to reorganize Xintai Company (the “Reorganization”) by transferring the 80% equity interests in Xintai Company held by them to Ordos Neng Hua. |
| 5. | For the purpose of the Agreement, Transferors shall refer collectively to transferor A and transferor B unless otherwise specified herein and shall undertake the incidental responsibilities of their obligations and responsibilities to the Transferee under this Agreement. The direct credit of the Equity Transfer Price to the designated account of transferor A by the Transferee pursuant to the Agreement shall be deemed as the fulfillment of its payment obligations of the Equity Transfer Price to Transferors A and B. |
In this regard, all parties have reached consensus to sign the reorganization agreement.
Article 1 Definitions
In this Agreement, unless the context requires otherwise, the following expressions have the following meaning:
| “Target Company” | Inner Mongolia Xintai Coal Mining Company Limited |
| “Wenyu Coal Mine” | the new Wenyu coal mine of Inner Mongolia Xintai Coal Mining Company Limited by the consolidation of the original Wenyu coal mine of Inner Mongolia Xintai Coal Mining Company Limited and the original Manlailiang coal mine of Ordos Qianqiu Mining Development Co., Limited |
| “Transferors” | the shareholders of the Target Company, namely Wang Jun and He Ning |
| “Transferee” | Yanzhou Coal Mining Ordos Neng Hua Company Limited |
| “Target Interest” | the 50% and 30% equity interests in the Target Company held by transferors A and B respectively, as of the date of the execution of this Agreement, totaling 80% equity interests in the Target Company |
| “Equity Transfer” | the Transferors sell and Ordos Neng Hua acquires the Target Interest in accordance with the Agreement |
| “Effective Date” | the date on which the precedent conditions as stipulated under article 12.2 of this Agreement has been fully satisfied or exempted as agreed and confirmed by both parties |
| “Equity Transfer Price” | the equity transfer price in an aggregate amount of RMB2,801,556,420 payable by the Transferee to each of the Transferors as determined by the valuation of the Target Interest |
| “Valuation Report” | the valuation report issued by the appraisal institution with the relevant qualification appointed by the Transferee in relation to the market value of the Target Interest under the Equity Transfer as of the Valuation Date |
| “Valuation Date” | 31 May 2011 |
| “Target Interest Valuation” | the valuation of the Target Interest as of the Valuation Date determined by the appraisal institution with the relevant qualification appointed by the Transferee of the Target Interest |
| “Target Interest Transfer” | the application for amendments to the industry and commerce registration of the Target Interest under the name of the Transferee |
Article 2 Target Company
Company name: Inner Mongolia Xintai Coal Mining Company Limited
Location: Dongsheng District of Ordos, the Inner Mongolia
Authorized representative: Wang Jun
Registered capital: RMB5 million
Business scope: technical upgrades to coal mines, only for technical upgrade and no production and operation are permitted (except for branches) (no production and operation are permitted unless approved by laws, administrative regulations or requirements as stipulated by the State Council)
Shareholding structure: 70% and 30% equity interests are held by Wang Jun and He Ning, respectively
(See appendix I set out herein for the breakdown of the fixed assets of the Target Company.)
Article 3 Specific Cooperation Arrangement
| 3.1 | For the purpose of this Reorganization, the Transferors agreed to transfer the Target Interest to the Transferee and the Transferee agreed to accept the transfer. |
| 3.2 | All parties agreed the Equity Transfer Price to be RMB2,801,556,420 (including net payable to the Transferors after tax of RMB2,520,000,000 and the income tax and stamp duty deductible on behalf of the Transferors of RMB281,556,420. All tax expenses arising from the Equity Transfer shall be incurred by the Transferee and shall not be borne by the Transferors). The Transferee of the Target Interest shall be assessed by appraisal institutions with legal qualifications, and the appraisal results shall be submitted to the relevant state-owned assets administrative authority or competent authorities for approval/filing. |
| 3.3 | The Transferors and the Transferee agreed to transact the relevant matters of the Equity Transfer in accordance with the following conditions: |
| (1) | Payment of the first installment of the transfer price. Upon the Agreement became effective pursuant to article 12.2, the Transferee credited RMB2,470,000,000 to the designated account of transferor A as the first installment of the Equity Transfer Price on 17 July 2011. |
| (2) | Take-over by the Transferee. On 20 July 2011 (the “Completion Date”), the Transferee took over the Target Company and Wenyu Coal Mine, and the Transferors shall cooperate accordingly. The specific take-over procedure was effected in accordance with article 6.1 of the Agreement. |
| (3) | Target Interest Transfer. The Transferors shall be responsible for the commerce registration of the Target Interest by the Bureau of Industries and Commerce Administration, the Inner Mongolia Autonomous Region under the name of the Transferee within 15 days after the payment of the above first installment of the transfer price by the Transferee. The registration period shall be extended for reasons other than delays caused by the Transferors. |
| (4) | Settlement of debts and liabilities. Within 10 days after the payment of the above first installment of the transfer price, the Transferors shall fully settle the debts and liabilities of the Target Company, and pay the consideration for the remaining mining right of Wenyu Coal Mine in full and to provide the Transferee with the relevant legal payment evidence. |
| (5) | Application for the relevant licenses. After payment of the above first installment of the transfer price by the Transferee, Hu Liangen is delegated by the Transferors to be in charge of the resettlement of the villages within the coal field (upper Manlailiang village) (excluding residences on the sides of the road) of Wenyu Coal Mine, the examination of the 3 million tonnes per year expansion project, which has obtained the approvals and valid licenses of all competent authorities, and renewal of coal mine permits for daily operation of Wenyu Coal Mine (mining license, safety production license and coal production license). All procedures shall be completed by the Transferors as soon as possible and no later than 31 December 2011. All expenses shall be borne by the Transferors. The Transferee and the Target Company taken over by it shall assume no liability. The examination period shall be extended for reasons including the change in authorized representative or new policies promulgated by the State and otherwise not caused by the Transferors which affect the examination of the consolidation and expansion project of Wenyu Coal Mine. The Target Company taken over by the Transferee shall be liable for additional items, machinery and equipment required under the new policies promulgated by the State during the examination period of the consolidation and expansion project of Wenyu Coal Mine and the examination period shall be extended for any resulting delays in examination. |
| (6) | Payment of the second installment of the transfer price. Within five days after the completion of all works set out in item (5) above, the Transferee shall credit the remaining transfer price of RMB50,000,000 to the designated account of transferor A. |
Article 4 Representations and Warranties of the Transferors